Bottlenecks to Property Management Profitability: Maintenance
On The Property Management Show today, we’re talking to John Bykowski, CEO at Fourandhalf as well as Matt Simons, general manager of Abodea. Our topic is maintenance for property management companies.
How can maintenance be a bottleneck to profitability, and what can property management company owners do to mitigate that risk?
By the way — have you caught our other episodes on Bottlenecks to Property Management Profitability? If not, be sure to check out our episodes on: Focusing on the Wrong Activities, Poor Accounting and Leaky Sales Funnels.
Alright, let’s dive in!
Introducing Matt and Abodea
Matt is responsible for building the customer service component of what Abodea does, and if you’re not familiar with Abodea, you might have known them as SuperTenders, which was founded as NightTenders. They were the first company in their space to provide after-hours maintenance support to property managers.
Now, the company coordinates maintenance support for property management companies at all hours of the day and night.
If the power goes out or the bathroom is flooding or it’s 105 degrees and the air conditioning doesn’t work, you can use Abodea to respond to the tenant, diagnose the problem, and take the appropriate action. The company was created by a property management veteran who recognized that maintenance is a major pain point for property management companies.
John and Matt met at a sales conference in Nashville recently and got to talking about how maintenance can really be a bottleneck for property management companies that are trying to grow.
How Maintenance in Property Management Can Hold Your Company Back
A company’s scale of operations can create a bottleneck when it comes to maintenance and profitability. Abodea discovered that customers who were smaller or start-up companies were dedicating a lot of time and resources to maintenance, and not getting anything back.
Maintenance is unpredictable. It’s not like collecting rent or paying owners. You can go months without any maintenance needs or have three properties need something major in one month. So, it’s hard to allocate resources to efficiently manage the repair issues and dispatch vendors.
Maintenance is a delicate part of your property management business. Each maintenance call is different in its importance and urgency. A repair that’s handled the wrong way can cause long-term, sustained damage to your owner’s property. It can deplete the quality of life for your tenant. So when it’s 3:00 in the morning and you have to make a quick decision, your judgment can be difficult to trust, no matter how long you’ve been in the business.
This can create customer churn.
There’s also the matter of finding and retaining good vendors. You have to build a vendor list that includes professionals you can trust. It’s a good idea to have three or four vendors you can call in each specialty so you have the confidence that you’ll be able to get someone on the phone immediately when necessary.
Building and maintaining a vendor list takes a lot of time and resources. Doing maintenance correctly can be an overwhelming cost, even for large property management companies.
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Building Maintenance in Property Management as a Revenue Stream
On the flip side, there are revenue streams associated with rental property maintenance.
That revenue can offset the cost of maintenance, and sometimes significantly. So, the entire maintenance experience for property managers is on a spectrum. It can be a big cost center or just a big cost. And, if you’re not appropriately scaled or you haven’t allocated your maintenance resources correctly, you can lose customers and create damage to properties.
Usually, maintenance is separate from general property managers. A lot of companies have upcharges that are included in maintenance invoices. That’s because maintenance is unexpected and unpredictable. Each maintenance issue is a single event, so you’re being compensated for the time it takes to diagnose the problem and dispatch the appropriate professionals.
If that cost isn’t property communicated to property owners, there will be issues. The upcharge has to be aligned with the market and easy to explain. Property managers face bottlenecks here if they can’t communicate the value of proper maintenance response to their customers.
Moving from Big Cost to Cost Center with Maintenance: Know Your Numbers
Know your numbers and your ratios if you want to move from losing money on maintenance to turning it into a profit center.
Understand the costs you incur on maintenance, separate from the costs you incur on the business overall.
Calculate your revenues too. These need to be separate and the only way to avoid cost creep is by staying on top of what your maintenance services are costing you and what they’re earning you.
It won’t take long to find inefficiencies.
Matt recommends thinking in terms of 400 units to one maintenance coordinator.
If you have one staff person managing maintenance for 200 units, you’re probably not utilizing your staff in the best possible way. If your maintenance coordinator is responsible for 600 units, you may notice that details are being missed and mistakes are being made. There are bound to be distractions. If you’re not sure of your numbers or how to analyze what you’re spending or earning with maintenance, find some software or utilize a company like Profit Coach.
Taking Ownership of Property Management Maintenance: Customer Service
It’s not uncommon for company owners to be too involved in maintenance decisions. This can distract you from growing your business. It also leads to a poor customer experience. If a tenant is waiting for a repair because the property management company’s owner has to approve it before anyone can do anything, you can expect a damaging Yelp review before too long.
As the owner, you have to be in tune with the quality of the customer experience. You don’t have to approve a sink repair. Make sure your maintenance process is confident and competent.
Operationalizing maintenance is important and a good way to remove the bottleneck. You need clearly defined policies, practices, preferences, and expectations. Training, obviously, is critical. The maintenance coordinators at Abodea undergo a process of knowing how to troubleshoot and support the tenants who are calling. They need to know how to distinguish an emergency from a general repair. Your staff has to be able to do the same thing.
The onboarding process that Matt uses involves 147 different questions for each customer. So, if you’re a property management company that’s going to start working with Abodea, they want to be sure they respond to each maintenance issue in accordance with your policies, plans, and priorities. So, you’ll answer 147 questions about how maintenance responses should be handled.
While 80 percent of those questions often have default answers that are consistent from all property managers, the idea is to create a completely customized experience. No one gets the same exact service. Each property management company can also provide a prioritized vendor list. Responses can be consistent across a management company’s portfolio or dependent on each property within that portfolio.
This sounds like a decision tree, and most property management companies have a decision tree in place when it comes to maintenance – but the maturity of that tree varies dramatically.
Safeguard Your Maintenance Revenue Center
As you’ve seen, eliminating the maintenance bottleneck requires you to know your numbers and standardize your practice.
It’s also critical that you safeguard your revenue center.
Every opportunity to mitigate your maintenance cost is important to pursue. Make sure you’re safeguarding the revenues that are due to you as a property manager. If you understand your market, you know what’s acceptable for maintenance charges. Find out if the standard maintenance upcharge is 15 percent or 20 percent. Make sure you’re where you need to be.
Understand where your revenue can and does come from. Make sure you can explain to owners where the costs are. They won’t mind paying a maintenance upcharge only when they need it if it means keeping the overall monthly management fee lower. Know what your vendors are charging you. If you have great relationships and you’re receiving a 30 percent discount from your contractors, you can work that into a great profit margin. You have to know where your revenue is coming from just like you have to know where your costs are.
Maintenance Myths: It Doesn’t Have to Be a Headache
Maintenance doesn’t have to be as terrible as property managers seem to think it is.
Whether your company is a start-up or very large or in the process of scaling, you can have a maintenance system that’s wired tight. Matt has seen it and he knows it doesn’t depend on business size. It depends on effort and strategy.
Every successful maintenance department is different. Some property managers keep it all in-house and it works. Some companies outsource everything and it works. Sometimes, there are platforms or automations that work wonders and other companies keep it 100 percent human and that works too. You can find and maintain a positive maintenance margin.
Scope of service and customer service will drive how you structure your maintenance department. At Abodea, they have done the math and with their 400:1 ratio for units to maintenance coordinators, it turns out that after taxes and payroll and recruiting fees and other hiring costs, your maintenance coordinator will likely cost you an average of $52,000 or $53,000 per year. Are you using that bucket of money effectively with an in-house maintenance coordinator?
Maybe you are. Or, maybe you want to outsource it for less. Operate within the boundaries that you have. If you’re managing 25 doors, you’re probably managing the maintenance yourself. Make sure you have planned for what you’ll do when you have those 400 doors.
Matt’s company handles a lot of maintenance calls. The statistics on maintenance vary wildly depending on market, tenant training, and maintenance delivery method. He does know that on average it takes about half an hour to diagnose the problem at a rental property. He also knows that about 50 percent of the maintenance requests that come through his company are emergencies.
Tenant Training Reduces Maintenance Bottlenecks
If your tenants are trained in how the property works and they’re aware of their responsibilities and expectations, you’ll have a lot fewer maintenance headaches.
Abodea has presented a tenant training module because they know that it’s an important part of effective maintenance support. It brings down the number of maintenance calls that require a response. Not only are there fewer calls, but there are shorter calls.
This enforces the idea that you can control more of your maintenance costs than you think you can. Tenant training helps.
Get a better handle on your maintenance costs by reducing the time you have to spend responding to issues that tenants can take care of themselves.
Matt has some ideas for this:
- Print up something for the fridge that walks tenants through the maintenance process.
- Create a separate document outside of the lease that lists the tenants’ responsibilities and where they’ll be held accountable. Have them sign it when they sign the lease.
- Create videos on how to handle sprinklers or garbage disposals. Make sure the tenants acknowledge that they watched the videos and understand the repair process.
If the tenants know that replacing the batteries in the thermostat is their responsibility, you won’t have a call in the middle of the summer that the air conditioning isn’t working. It will save you time and it will save your owner the cost of sending a vendor out to the property to replace thermostat batteries.
Don’t just promote tenant accountability – insist on it.
Here’s what Matt and John want you to remember about today’s podcast: you can really remove the property management maintenance bottleneck to your productivity if you know your times. Find the wasted time and money in your maintenance process and do better so you can grow your property management business.
If you have any questions, reach out to Matt at Abodea or contact our team at Fourandhalf.